AXT reports narrower losses than expected
The company reported a net loss for the first quarter of 2003 of $4.3 million, or $0.19 per diluted share, compared with a net loss of $17.5 million, or $0.78 per diluted share, for the last quarter of 2002. The net loss in the fourth quarter of 2002, which included various charges totaling $14.5 million, was $3.6 million, or $0.16 per diluted share.
On March 18, AXT said that it expected revenue to be in the middle of the guidance range of $11.8 million to $12.7 million, and that the net loss would be $0.22-0.24 per share.
"Our performance improved during the first quarter in three critical areas: cash balances increased, sales rose of our two leading products, GaAs substrates and high brightness LEDs, and gross and operating margins were above expectations," said Morris Young, president and CEO.
The company s performance was assisted by the sale of one of its buildings, which netted $5.2 million.
Substrates
Revenue for the substrate division, which represented 67 percent of total revenue for the first quarter of 2003, was $8.5 million, the same as for the final quarter of 2002. Substrate revenue in the first quarter of 2002 was $11.7 million.
Driven by increased demand for 2-inch diameter substrates used for red and yellow LEDs, AXT s substrate division reported the highest sales of GaAs products since the third quarter of 2002.
"We continue to see aggressive competition from other manufacturers offering VGF-like substrates," said Young. "To offset these developments, we committed most of our substrate R&D during the past two quarters to improving our customers yields. Several customers report that our defect rate has declined during the past two quarters."
Optoelectronics
Revenue from the optoelectronics division, which represented 33 percent of total revenue for the first quarter of 2003, was $4.1 million, compared with $3.8 million in the fourth quarter of 2002. Optoelectronics revenue in the first quarter of 2002 was $5.0 million.
AXT reported that its cost per LED declined as the process improvements launched during the fourth quarter continued to pay dividends. Beginning in late February a significant price reduction for LEDs was experienced, particularly for low-end chips. "The price decline is responsible for the decline in gross margins recorded by our optoelectronics division in the first quarter and may delay achievement of profitability in this division," said Young.
Outlook
AXT anticipates that its revenue for the June 2003 quarter will be between $12.4 and $13.2 million, with a net loss of between $4.5 and $5.0 million, or between $0.20-0.23 per diluted share.
Although AXT thinks the current quarter will be challenging, progress is being made. "Our recent reductions in defect densities in our substrates are attracting more orders, and manufacturing costs are declining," said Young.
"While our optoelectronic business faces significant price pressure, we have been making steady progress in reducing costs," added Young. "As we move more of our production effort to China and bring more efficient equipment on-line, our costs should decline further."
